[edit] Citadel Securities
Since Griffin founded the firm 20 years ago, it has diversified its business from a hedge fund manager to a financial institution focused on alternative investment management and advisory, attempting to fill the demand gap created by the collapse of Lehman Brothers and Bear Stearns. The firm's investment banking unit, Citadel Securities, comprises investment banking advisory, a sales and trading platform, and an industry leading market making franchise. Proud of Citadel’s growth, Griffin has stated, “The name Citadel means strength and it speaks to our culture of performance, risk management and our ability to succeed in volatility."[7][edit] Credit Market Derivatives Exchange
In March 2009, Citadel and the CME Group announced they had received SEC approval to launch a joint clearing and exchange solution for the $43 trillion credit default swap (CDS) market, called the Credit Market Derivatives Exchange, or CMDX.[8] In addition to improving transparency, the exchange offers immediate confirmation of trades, avoiding the operational risks associated with unconfirmed CDS transactions.[9] In an interview Citadel's Ken Griffin and Craig Donahue, CEO of the CME Group, confirmed that the platform is up and ready and that interest has been high.[8]Credit default swaps play an important role in a company's risk management procedure, which has made CMDX a compelling solution as institutions seek "transparent, secure and liquid market alternatives,” said CME Group Executive Chairman Terry Duffy.[10] The creation of the exchange was proposed as a solution to one of the many causes of the financial crisis of 2007–2010,[11] as its transparency can provide regulators with immediate access to positions and trading information.[11]
[edit] Fee structure
An April 2005 Bloomberg news article noted that David Shaw's D.E. Shaw & Co., which then had $14.7 billion in assets under management, and Tudor Investment Corporation both had less than half as many employees as Citadel does.[12] It stated that unlike most other hedge funds where investors are charged a flat management fee of 1-2 percent of assets and 20 percent of profits, the investors that invest in hedge funds managed by Citadel bear the entire cost of running the company, a bill that historically has equaled 3-6 percent of assets for the computer systems and larger-than-average staff.[12] Morgan Creeks' Yusko was quoted as saying "Their expense structure is high compared with others. Ultimately, we overlooked it because their returns were so high." However, in 2008, Citadel “gave back about $300 million in fees it had collected during money-losing months.”[13][edit] Corporate culture
The local press has called Citadel "Chicago's revolving door". (People close to the firm say turnover is on a par with a typical investment bank's.) [1] Commenting on this reputation, Mr. Griffin has said, “People say...’It’s a tough place to work. It’s demanding. It’s unrelenting.’ I look at these as strengths inherent in strong companies... I’m very proud that we have a sterling reputation when it comes to doing what we say we’re going to do.” [5] Mike Pyles, Citadel's Head of Human Resources stated that "When the markets change, we don't accept lower returns. We aren't that kind of firm. We expect the manager to go and figure out how to make money in the new market. We make no apology for it." [14]A 2005 Bloomberg interview noted that "[Griffin] keeps a row of management-theory books on a credenza behind his desk, and he says he tries to emulate one of America's most celebrated business leaders, former General Electric Co. CEO Jack Welch."[12] Griffin is the son of a former GE project manager.[15]
Philip Halpern, former endowment manager of the University of Chicago, stated "I like to see some broad experience set when I invest in managers. My concern is that Citadel doesn't have that. The turnover has been too high over the years."[16]
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